In Today’s tough economic times, sticking as closely to your budget is paramount, especially on big ticket items such as construction costs. Below are five tips that you can employ to help avoid or at the very least manage your construction costs and giving you a better chance to finish on time and on budget.
1. AVOID SCOPE CREEP…DEFINE YOUR SCOPE
Scope Creep is when additional construction requirements are added at various stages to a project that were not included in the budgeting phase or not added to the tender documents to be priced.
One type of scope creep is upgrading materials. For example, upgrading carpet from 25oz weight to 30oz weight; or changing from hollow metal doors and frames to wood doors and frames; or installing category 6 cabling over the specified and budgeted Category 5e cabling. These items seem rather benign, but over 10,000 square feet, costs can quickly add up.
Another type of scope creep is what I call ‘interior envy’. An example, is asking for a waterfall feature because a competitor has it. Figure out what you want before the bid documents go out to the market for pricing.
The third type of scope creep is “special dispensation.” Although not common, a request is made by an employee (at any level) for special requirements in their work space. For example, special lighting due to eye issues, special seating due back/shoulder/wrist issues, or special ventilation because smells of hand creams, perfume and cologne are to strong/distracting to work. These are real challenges all organizations face, however, having a creative team of construction professionals will help come up with creative solutions to resolve these challenges at a minimal cost.
The potential impact of scope creep is two-fold. First, you may go over budget, and second, it may impact schedule affecting occupancy (move in) dates., which can really impact your business negatively. Once you have the company requirements try to stick to it.
2. HAVE YOUR DRAWINGS COORDINATED
Construction Drawings are the detailed instructions or road map on how to build out a project. Although a simplified example, most projects require at a minimum architectural, mechanical and electrical drawings. Sometimes communications, structural and other consultants are hired to create drawings as well.
The drawings process follows a path from the architect who is to provide the details necessary to build the project on a set on drawings. The architect will then send their drawings to mechanical, electrical, structural and communications consultants to draw their specific set of instruction with regards to the project. The coordination of these drawings ensures that the information from the architectural drawings is correctly translated to the consultants’ mechanical, electrical, communication, and structural drawings. Also, the consultant’s drawings may have information that will refer you back to the architectural drawings. This information needs to be coordinated.
The possible impact of poorly coordinated drawings is incomplete tender submissions at the time of the project tender closing. This may lead to a wide range in tender submission costs and/or change order requests after the project has started.
3. ENSURE INFORMATION IS ACCURATE AND SPECIFIC
The best way to improve the chances of issuing a competitive bid is ensuring all the information provided to the project lead is accurate. Statements such as “fix or replace blinds” are ambiguous and are difficult to price. The fixing cost and the replacement may be significantly different. Either is possible, but let your project lead know which course of action you want to take, so all bidders are pricing “apples”, not some apples and others “oranges”.
Another example is “provide new ceiling tiles where necessary”. This statement can lead to a wide array of interpretations. For example, one person may interpret that as 10% of the ceiling tiles need to be replaced, another may think 50%, and you, the client, may think 90% of tiles need to be replaced.
One impact of uncertain statements or missing information is that multiple bidders with different interpretations of the drawings can affect the competitive process. Pricing may be submitted with a wide variance between contractors, which sometimes lead to the question did the low bidder miss a component in their tender or did the high bidder see something no else did. Providing accurate information to your prime consultant will allow the drawings to be specific as possible.
4. LEAVE YOURSELF AMPLE TIME LINES
Many projects have a specific time period in which they should be completed. Unfortunately, many project are not given the adequate time in which to complete them. Therefore, measures need to be taken to complete the project on time. These creative measure come in the form of substitution of materials, design changes, extra resources required, overtime, multiple shifts, or nights and weekends where work must be performed to meet the schedule.
The impact of any of these measures is that labour costs will be driven up. Give your self as much time as possible. It is better to be ready to move in 5 days early than 5 minutes late.
As a general guideline a 10,000 square foot space you should allow 7 months from the time your lease is signed. This will give you the time to define your scope internally (know what you want), engage a construction professional and consultants, create construction documents, permits, tendering, construction and transition to your new space. An additional 5,000 square feet may/can add an additional 3 weeks to a project as a general guideline. Every projects is different and has it’s own nuances, therefore, these estimates are not hard and fast rules by any measure. Depending on your specific requirements, size and location of your project timelines can be increased or decreased.
5. KEEP IT COMPETITIVE
The object of undergoing a competitive tendering process is to encourage a competitive environment to obtain the pricing from well qualified trades by multiple Construction Managers/General Contractors. However, when a trade is singled sourced, the competitiveness of that particular discipline (i.e. electrical) is reduced because the single source can adjusts their price to suit an uncompetitive situation.
The obvious impact of lack of competition is increased prices. When possible (often Property Managers will mandate the use of their Life Safety contractor) try open up process to qualified trades. Three to five sub contractors per discipline is a good range.
Although the above five points are not guaranteed to control or eliminate all additional costs (because some are unforeseen), they can help in reducing them compared to not following them.
By Christopher Sandiford